May 9, 2019
Hourly Rate Calculators - part 2
Sent by Jonathan Stark on May 9th, 2019
Hourly rate calculators typically start by asking you something like:
“What is your desired annual salary?”
As a starting point, this is nonsense but okay… let’s think about it for a sec because I think it reveals an interesting psychology.
“Why not enter $1,000,000 as my desired annual salary? Why not $10,000,000?”
These are not outrageous annual revenue numbers for a small business, but I’d be pretty surprised if many people entered a million+ dollar desired salary into one of these calculators. I think I know why they don’t... because entering 7- and 8-figure numbers into a rate calculator immediately reveals the insanity of hourly billing.
Consider this: to make $1 million dollars per year working 40 billable hours per week, 52 weeks per year, your hourly rate would work out to $480.77/hour.
- Would clients hang up as soon as you told them you charge almost $500 bucks per hour? How would you justify it?
- Could you really be billable 40 hours per week 52 weeks per year? What about administrative duties? What about vacation? What about sick days?
- Would $1M per year in gross revenue (maybe $650K after tax and expenses) be enough? Will it still be enough in 10 years?
Billing for your time is a really hard way to generate $1M or more in annual revenue. Heck, it’s a really hard way to generate a quarter of that. Bottom line? Billing hourly places an artificial ceiling on your income.
The solution? Instead of playing with imaginary numbers in an hourly rate calculator, talk to your ideal buyers about what they would value most. Then package that up in a way that leverages your expertise in a low-touch, repeatable fashion.